Spice Communications Limited

Spice Communications LimitedInvestor Presentation

03 Mar 2008

PRIVATE & CONFIDENTIAL

Spice is poised to become a pan-India player

2


3

Critical Success FactorsLicenses and Allocation of Spectrum

•Company is an incumbent and strong player in the states of Punjab & Karnataka, with conspicuous market-share (~4 million subscribers)

•Company had applied for 20 more licenses representing over 90% market opportunity in Aug ‘06 and is having 1st priority based on date of application in 12 circles and 2nd/ 3rd priority in balance circles

•TDSAT (Telecom Tribunal) has already directed the Dept. of Telecommunications to keep priority of Spice Comm while allocating Spectrum on the same basis

Spectrum available for allotment to 2 new players. Spice being one.


Strong case for additional licenses

S.No Circle Priority Ist Priority II nd Priority III rd Priority IV th Priority V Priority VI Priority VII Priority VIII Priority IX

1 AP Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

2 Delhi Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

3 Maharashtra Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

4 Haryana Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

5 Gujarat Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

6 HP Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

7 Kerala Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

8 M.P Spice(01.09.06) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)9 Mumbai Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Unitech (24.09.07) Shyam (25.09.07)

10 Rajasthan Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07)

11 U.P(E) Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

12 U.P(W) Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

13 Bihar Bycell (31.01.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

14 Chennai & T.N Idea(26.06.06) Spice(01.09.06) Sw an(02.03.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

15 Kolkatta Idea(26.06.06) Spice(01.09.06) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)16 W.B Bycell (31.01.06) Idea(26.06.06) Spice(01.09.06) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

17 J&K TTSL(21.06.06) Idea(26.06.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

18 Orissa Bycell (31.01.06) Idea(26.06.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07) Shyam (25.09.07)

19 Assam Bycell (31.01.06) TTSL(21.06.06) Idea(26.06.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07)Shyam (25.09.07)

20 N.E Bycell (31.01.06) TTSL(21.06.06) Idea(26.06.06) Spice(01.09.06) S Tel (09.08.07) Datacom(28.08.07) Loop (06.09.07) Unitech (24.09.07)Shyam (25.09.07)

Priority of Licensing as per Date of Application


5

Entry BarriersLicense / Spectrum

Without considering allocation for existing players (which is a dire need for most) and the need to allocate a minimum of 4.4 MHZ per new player per circle, it is apparent that there is a strong entry barrier for a new player to get allocation of spectrum.

At best, the aforesaid would imply there could be one or maybe 2 players who could get a Pan-India license.

Spice is the only existing player that has the opportunity to roll out on a Pan-India play – has the opportunity to address 90% market opportunity

CircleSpectrumAlready Allotted

Available Spectrum

with Government

Spectrum # of parties Spice order

Andhra Pradesh 41.20 5.00 4.40 1.00 YesDelhi 49.20 5.80 4.40 1.00 YesMaharashtra 41.20 4.80 4.40 1.00 YesHarayana 37.40 7.60 4.40 1.00 YesGujarat 38.40 4.00 4.40 1.00 YesHimachal Pradesh 27.40 9.40 4.40 2.00 YesKerela 37.20 6.00 4.40 1.00 YesMadhya Pradesh 35.40 10.20 4.40 2.00 YesMumbai 50.40 4.60 4.40 1.00 YesRajasthan 39.80 9.60 4.40 2.00 YesUttar Pradesh (E) 38.80 5.80 4.40 1.00 YesUttar Pradesh (W) 37.20 5.80 4.40 1.00 YesBihar 35.40 5.80 4.40 1.00 NoChennai & Tamil Nadu 34.80 17.20 4.40 2.00 YesKolkatta 34.60 6.60 4.40 1.00 NoWest Bengal 25.60 12.00 4.40 2.00 NoJ ammu & Kashmir 23.00 12.60 4.40 2.00 NoOrissa 24.80 10.00 4.40 2.00 NoAssam 23.00 12.00 4.40 2.00 NoNorth East 19.40 10.60 4.40 2.00 No


Recent developments reinforce our case

• Recent judgments preserve our priority in Spectrum queue

• Further strengthen our case for additional Licenses

The Economic Times, New Delhi, Feb 28, 2008

Financial & Operating Highlights

7


Financial Statements

Operating Parameters

Financial Statements Analysis






Spice Comm: P&L Account

Rupees ( Million )

Year Ended 31 December

2007

6 Months Ended 31

December 2006

Operating Income 9,578 3,892

Other Income 768 106

Profit on Sales of Passive Infrastructure 4,393 -

Total Income 14,739 3,998

Total Operating Expenditure 7,343 3,053

EBITDA 7,396 945

Finance Costs 1,659 631

Depreciation & Amortisation 1,814 696

Amortisation of share issue expenses 40 -

Profit before Tax 3,884 (382)

Tax 82 5

Profit after Tax 3,801 (387)


Spice Comm: Operating Expenses

Rupees ( Million )

Year Ended 31 December 2007

6 Months ended 31 December 2006

Amount

% of

Amount

% of

Operating

Income Operating

Income

Operating Costs

4,213 44.0%

1,653 42.5%

Administrative Costs

1,209 12.6%

624 16.0%

Sales & Marketing Costs

1,391 14.5%

566 14.5%

Revenue Sharing License Fee

529 5.5%

210 5.4%

Total Operating Expenditure

7,343 76.7%

3,053 78.4%


Balance Sheet Snapshot – December 2007

Rupees ( Million )

Dec'07 Period ended

Dec'06

Equity Share Capital 6,899 5,519

Reserves & Surplus 4,943 -

Loan Funds 15,725 12,079

Total Liabilities 27,567 17,598

Gross Block 27,835 20,440

Depreciation 10,418 10,263

Net Block 17,417 10,177

Investments 972

Net Current Assets (excluding cash) 4,233 (1,176)

Cash & Bank Balances 1,087 1,273

Net Current Assets 5,320 97

Misc. Expenditure 596 281

P&L Account 3,263 7,043

Total Assets 27,567 17,598






11921358

14971666

2031

0

500

1000

1500

2000

2500

Dec 06 Mar 07 Jun 07 Sep 07 Dec'07

Punjab: Expanding network and subscriber base

1,9121,749 2,1992,327

2,113

23%23% 23% 23% 22%

500

1,000

1,500

2,000

2,500

Dec-06 Mar-07 Jun-07 Sep-07 Dec'07

0%

10%

20%

30%

Total Subs (Nos '000) Market Share

Network Minutes (Mn per month)

Network expansion strategy to maintain Spice position as top two operators

453 new towns covered since Dec 0670% increase in Cell Sites in one year

839

466

537

631

919968

74750%53%

58%63% 67%

300

550

800

1050

Dec 06 Mar 07 J un 07 Sep 07 Dec '07 Total Towns

0%

20%

40%

60%

80%Spice Presence % Population Covered

365

172

610667

733 716785

200

400

600

800


Total Market Share

169 116

166 139

9471


8381019

11581328

1632

0

500

1000

1500

2000

Dec 06 Mar 07 Jun 07 Sep 07 Dec'07

701817

1,057

1,283

1,474

10%

7% 7%8% 9%

0

500

1,000

1,500


0%

10%

20%

Total Subs (Nos '000) Market Share

223 new towns covered since Dec 0695% increase in Cell Sites since Dec 06

Expansion strategy leading market share gain Network Minutes ( Mn per month )

Network investments & increasing coverage has led to growth in market share

794

178230 245

302401

950

20%27% 29%

36%40%

0

250

500

750

1000

Dec 06 Mar 07 J un 07 Sep 07 Dec'07 Total Towns0%

10%

20%

30%

40%

50%Spice Presence % Population Covered

304

99

265307

374

469533

0

150

300

450

600


170 57

181139

1552

Karnataka: Expanding network and subscriber base


Investments Beginning to Yield Results

Increasing Subscriber Base Leading to Strong Growth in Revenues

* Revenues are given as the average monthly revenues for the quarter ended

Punjab – ARPU Karnataka – ARPU

Karnataka - Revenue Run Rate*Punjab - Revenue Run Rate*

- - -

535

478 477 496 524

-

100

200

300

400

500

600

Dec'06 Mar'07 Jun'07 Sep'07 Dec'07

In R

s. M

io

332317

277236

204

-

100

200

300

400


In R

s. M

io269

305313321364

0

100

200

300

400


In Rs

.

313374

413

260

423

-

100

200

300

400

500

Dec'06 Mar'07 Jun'07 Sep'07 Dec '07

In R

s.






Analysis- Income

Operating Income Component Grew by (Rs. Mio)

Call Charges 110

Activation / Administrative Charges 15

VAS Revenue 19

Operating Income

Operating Income during the year 2007 grew by 23% in comparison to annualized operating income of previous

six months

Average monthly operating income grew by Rs. 149 Mio and reached to Rs. 798 Mio in comparison to Rs. 649 Mio in

previous six months. Major contributors are -

Other income grew by Rs. 662 Mio during the year 2007resulting into 263% growth over annualized other income of previous six months. Major contributors are -

Other Income

VAS revenue contribution grew to 8.3% in the year 2007 in comparison to 7.4% in previous six months

Rs. Mio

Forex Gain 277

Interest Income 99

Operating Lease write back 250

Profit on sale of towers is Rs. 4,393 Mio in comparison to Rs. NIL in the previous six months


Analysis- Expenditure

Increase as a % of Operating Income

Repair Network 0.5%

Power & Fuel 2.8%

Rent 0.9%

Operating Cost in the year 2007as a percentage of operating revenue grew to 44% against 42.5%

during previous six months

Number of cell sites increased by 1,633 during the year 2007 and reached to 3,663 in Dec 2007 in

comparison to 2030 in Dec 2006.

Operating Cost

The above increase in cost has been partially offset by savings in the following cost –

This increase in cell sites resulted into increase in following major costs -

Savings as a % of Operating Income

Roaming Cost 1.4%

VAS outsourcing cost 1.2%


Analysis- Expenditure

Administrative Cost

Admin cost as a percentage of operating income during the year 2007 decreased to 12.6%

against 16% in the previous six month

Economy of scale has started getting reflected

Major expense head for savings are following -

Expenses Savings as a % of Operating Income

Salary 0.4%

Legal & Professional 1.5%

Traveling Cost 0.3%

Rent 0.2%

Provision for doubtful debt 0.3%


Analysis– Expenditure

Sales & Marketing

Sales & Marketing cost as a percentage of operating income in the year 2007 remains at 14.5% as in the previous six months

Advertising & Marketing cost as a percentage of operating income in the year 2007 gave savings of 0.7% over previous six months

The above savings has been offset by increase in dealer commission by 0.7% due to higher gross additions of 2,732 K in the year 2007 in comparison to 992 K in the previous six months.

Revenue sharing license fees during the year 2007 is 5.5% of operating income in comparison to 5.4% in the previous six months


Analysis– Expenditure

Finance Cost

Major items for increase are -

Finance cost during the year 2007 increased to 17.3% of operating income in comparison to 16.2% in the previous six month

Above increase has been partially offset by savings of 4.1% in interest on INR Debt due to repayment of debt by Rs. 3,420 Mio during the year

Particulars Percentage

Interest on USD Debt 0.5%

Prepayment Charges on INR Debt 1.2%

Provision for Interest on WPC 0.7%

Interest on Finance Lease 2.5%

Others 0.5%


Analysis– Balance Sheet

Company raised Rs. 6,322 Mio through IPO during the year

Balance of USD 10 Mio (Rs. 441 Mio) out of USD facility drawn down during the year

Rs. 3,420 Mio has been paid towards INR Debt repayment

Finance Lease obligation of Rs. 4,596 Mio has been created on account of capitalization of financial lease of towers

Rs. 323 Mio has been paid towards Vendor debt repayment

Deferred capital liability of Rs. 2,582 had been created on account of network assets procured on trial basis

Fixed Assets worth Rs. 9,054 Mio has been added during the year. Major assets added are -

Rs. Mio

Network Equipment 518

Assets taken on trial 3,026

Network Equipment on finance lease 4,375

Software 430

Handsets 394

Shareholding Fund

Loan Funds


Analysis– Balance Sheet

Rs. Mio

Increase in deposit to BOL operators 145

Deposit with Spice Corp 100

ICD 250

WPC payment under protest 455

Rs. Mio

Advance from customers 412

Sundry Creditors 223

Loans and Advances increased by Rs 983 Mio mainly on account of -

Other current assets of Rs. 5,122 Mio is on account of amount recoverable from tower sale

Current liabilities increased by 668 Mio mainly on account of -

Provisions have been increased by Rs. 154 Mio mainly on account of -

Miscellaneous expenditure increased by Rs. 315 Mio mainly on account of shares issue expenses

Rs. Mio

Provision for WPC Interest 67

Provision for MAT 66


THANK YOU

25

Documents

Spice Communications Limited